INVESTMENT GRADE ISSUANCE VOLUME

Supply

Last week, ex-SSA supply came in at $25.13 billion priced across 11 deals. Issuance is expected to remain steady this week as more companies emerge from their self-imposed blackout periods with average estimates calling for $25 to $30 billion.

  • Total ex-SSA issuance for 2021 is currently 6% ahead of last year’s levels at this point

  • Average size of the deal for 2021 is now $1.81 billion (in 2020, at this point of the year, it was $1.50 billion)

The largest transactions for the week were:

  • 7-Eleven $10.95 billion 8-part transaction comprised of 1.5-year floating rate notes and 2, 3, 5, 7, 10, 20 and 30-year fixed rate notes

  • JPMorgan Chase $5 billion 2-part deal including 6NC5 and 11NC10-year fixed-to-floating rate notes

  • Credit Suisse $4 billion 3-part deal consisting of 3-year fixed and floating rate notes and 6NC5-year fixed-to-floating rate notes

Corporate investment grade total issuance for the year is at $125 billion priced across 69 deals. The graph below summarizes weekly issuance in the US investment grade market since January 2020.

Demand

According to Lipper, last week, IG bond funds reported a net inflow of $2.077 billion. HY bond funds saw a net outflow of $3.589 billion (IG funds are at $ 98.960 billion of net inflows for the year, with HY funds at $32.362 billion of net inflows).



PRICING & PERFORMANCE

Supply for the last week of January was in line with estimates calling for $425 billion. Volume was driven by 7-Eleven’s $10.95 billion transaction, marking the largest deal of the year and bringing January’s total to initial estimates of $125 billion. Despite last week’s volatility in the secondary market, 7-Eleven’s fixed rate tranches tightened by an average of 7 bps as of Friday’s close. January’s new issue concessions average of -2 bps was the lowest monthly average in a year.

Following are additional metrics for deals priced last week:

Pricing Levels

Oversubscription Ratios

Oversubscription ratios (OSR) average for the month of January closed at 3.02x, while the weighted average was 2.82x.



New Issue Concessions

New Issue Concessions (NIC) average for the month of January closed at -2.03 bps, while the weighted average was -1.52 bps.



IG & HY INDEX

The Markit CDX North America IG Index, which tracks 125 equally weighted credit default swaps on IG entities closed four bps wider from last week at 56 bps, while the Markit CDX North America HY Index, which is composed of 100 credit default swaps on HY entities, closed 13 bps wider for the week at 318 bps.



US TREASURY RATES

Last Friday, US Treasury yields closed roughly stable versus the previous week. On Friday, yields across the curve fell, erasing what appeared to be a weekly increase amid a 1.9% fall in the S&P 500. Also on Friday, the ECB announced that there was no immediate need to cut interest rates but that the option remained on the table if economic conditions were to worsen. Meanwhile, the 5 to 10-year and 10 to 30-year yield spreads continue to maintain the highest levels in over three years.

Following are UST Yield Differentials recorded on January 29, 2020:

The U.S. 10-year Treasury yield closed the week at 1.07%, two basis point below the previous week’s close.



THE WEEK AHEAD

According to Bloomberg, following is the relevant economic data for this week:

Date Event Period Survey Prior
04/21/2021 07:00 MBA Mortgage Applications Apr-16 – -3.7%
04/22/2021 08:30 Initial Jobless Claims Apr-17 625k 576k
04/22/2021 10:00 Existing Home Sales Mar 6.15m 6.22m
04/22/2021 10:00 Leading Index Mar 0.9% 0.2%
04/23/2021 09:45 Markit US Manufacturing PMI Apr P 60.5 59.1
04/23/2021 10:00 New Home Sales Mar 885k 775k

SUMMARY OF LAST WEEK’S IG DEAL ACTIVITY

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